Aggregate demand shortfall: An aggregate demand shortfall occurs when aggregate demand is insufficient to purchase all goods and services produced by an economy at full employment. It results in unused capacity and unemployment.
Output gap: The output gap is the difference between actual output and potential output in an economy. A negative output gap indicates that actual output is below potential, reflecting underutilized resources due to economic downturns.
Stabilization policies: Stabilization policies refer to government actions aimed at reducing fluctuations in economic activity caused by business cycles. These policies include fiscal policy measures such as stimulus packages during recessions or periods of low aggregate demand.